Question for the Money Doctors

Question submitted on May 12, 2011.

Question

What is the limit on the amount of student loan debt a graduate should carry? I''ve heard that the amount you carry in student loans should not exceed the yearly salary you expect to be making after graduation. Is that generally right?

Answer

That’s a great question especially considering the economy over the last few years and the continually increasing cost of college. A question that you may want to ask first is, can you find a job after graduating college? More and more college graduates are moving back home because they either can’t find a job or don’t make enough to live on their own. For example, there are about 80,000 bartenders in the U.S. with college degrees. Nothing against bartenders, but I doubt that is what they studied in college; nor do they need a degree for that job.

I would be very careful before running up debt to get a college degree unless you are fairly sure that you can get a job (or start a business) and pay that debt off. Even $30,000 of college debt can take years to pay off for a college graduate. College education is an investment; and like any investment, it should give you a positive return in the future. I would recommend that you analyze your situation, the college, costs and potential benefits before deciding how much debt to take on. I don’t think there is a perfect answer to your question; my advice is to take on as little debt as possible even if it means delaying college or getting a part-time job. I hope this helps.